[Fact Check] Is the Housing Market Stabilizing Due to the Comprehensive Real Estate Measures?

President Moon Jae-in's Remarks at Blue House Senior Secretary and Advisor Meeting... Apartment Sales Price Index Still Rising Despite Slower Growth

[Asia Economy Reporter Ryu Jeong-min] “The overheated housing market is stabilizing.” President Moon Jae-in said this during the Blue House senior secretaries and aides meeting on the 10th, stating, “The effects of the (real estate) comprehensive measures are gradually appearing.”

Previously, the government announced the July 10 real estate measures and the August 4 real estate measures respectively. After announcing the strengthening of real estate tax policies to recover unearned income and plans to expand housing supply volumes, the Blue House views that the housing market is stabilizing.

The reason President Moon’s remarks became a subject of political controversy was due to the perceived temperature difference with the market. While it is good to hope for real estate market stabilization, it is problematic to speak of it as a ‘wishful thinking.’ The dictionary definition of ‘stabilization’ is ‘to maintain a peaceful state.’ In the real estate market, stabilization is interpreted as resolving housing price instability.

[Image source=Yonhap News]

An objective indicator to confirm the stabilization of the real estate market is the apartment sales price index fluctuation rate from the ‘National Housing Price Trend Survey’ published weekly by the Korea Appraisal Board. The most recent data was released on the 6th, covering the first week of August (as of the 3rd).

According to the Appraisal Board, the nationwide apartment sales price index fluctuation rate showed little change from 0.15% on July 6, before the July 10 measures were announced, to ▲0.15% on July 13 ▲0.12% on July 20 ▲0.13% on July 27 ▲0.13% on August 3.

In Seoul, the rates showed a decreasing trend: ▲0.11% on July 6 ▲0.09% on July 13 ▲0.06% on July 20 ▲0.04% on July 27 ▲0.04% on August 3. The notable point is that although the figures decreased, the sales price fluctuation rate is still on an upward trend, just with a reduced increase.

Evaluating this as the housing market having stabilized leaves room for doubt. Regarding this, a key Blue House official explained, “The President expressed that ‘the upward trend in housing prices is calming down.’ He actually said the housing price increase is slowing down.” It is true that the ‘rate of increase’ in housing prices is slowing down, especially in Seoul.

[Image source=Yonhap News]

Earlier, on the 10th during the senior secretaries meeting, President Moon said, “The upward trend in housing prices has begun to show signs of calming down,” and “I expect this trend to accelerate further once the effects of the measures fully take hold.” This statement may contain the answer to doubts about his remarks.

Real estate is a market influenced by sentiment. Although the government announced the July 10 and August 4 real estate measures, it is still premature to say the market has stabilized. In the case of the August 4 measures, which focus on expanding supply volumes in the metropolitan area, there are no indicators yet to verify their effects. The recent data from the Korea Appraisal Board is based on the 3rd, and the figures for the second week of August, as of the 10th, are scheduled to be released on the 13th.

On the 12th, Jin Seong-jun, a member of the Democratic Party of Korea, said in an interview with KBS Radio’s ‘Kim Kyung-rae’s Strong Current Affairs,’ “If the trend (regarding transaction volume and increase rate) continues, housing prices can stabilize, and I think the President also expressed such expectations,” but added, “However, it is not a situation to be merely optimistic about.”

Jin said, “The effects of the real estate measures are just beginning to appear, but it cannot yet be said that they have fully manifested. Time is needed,” adding, “In fact, the legal effectiveness of various real estate legislative measures will begin from next year.”